Housing Wealth Effects in Japan: Evidence Based on Household Micro Data

Using micro data covering almost 500,000 Japanese households over the period 1983-2012, we examine to what extent household consumption responds to changes in housing wealth. To do so, we estimate the housing wealth of individual households by matching several official statistics. Employing cross-section and pseudo-panel-based regressions, we find that the marginal propensity to consume (MPC) out of housing wealth is approximately 0.0008-0.0013 for nondurable consumption and 0.0059-0.0082 for total consumption. We further find that the consumption response of older households is larger than that of younger households, which is consistent with the pure wealth effects hypothesis.